Can a debt collector or creditor put a lien on your house for credit card debt? Mitch from Florida asked us: “Can credit card companies put a lien on my and my wife's house for my charge offs?”
Yes it’s possible for a lien to be placed on your home for certain debts, but a debt collector’s threats to do so may be illegal. Here is what you need to know to protect your property.
A credit card is an unsecured debt. The financial term “unsecured” means that there is no collateral, and there is typically nothing you own that a credit card company can repossess or take until you are sued and the creditor or collector gets a judgment against you. Before that happens, you should be notified of the lawsuit and have the opportunity to respond.
If you stop paying a debt, the creditor or collection agency may sue you. If it successfully sues you for a delinquent debt and obtains a judgment, it will try to collect that money from you. How they can collect a judgment depends on state law. In some states creditors with judgments can:
In some states, a judgment creditor may be able to place a lien on other personal property such as a car or truck.
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In most cases a creditor or debt collection agency must sue you for the unpaid debt and get a court judgment before it can place a lien against your house. There are several other situations where a lien may be filed:
Most states protect certain amounts of home equity from creditors. For example, in some states, like Arkansa, Florida or Texas, an unlimited amount of equity in your primary (homestead) residence may be protected from creditors.
In other states, the homestead exemption will vary. For example, in Maine, up to $47,500 in home equity may be protected from creditors, and it rises to $95,000 if:
Home equity generally refers to the difference between what your home is worth and what you owe on it. So if your home is worth $100,000 and you owe $60,000 on your mortgage, your equity is $40,000.
Usually a lien stays in place until it is satisfied (paid) or you sell the home, at which point it must be paid in order to release the title. In some cases, a lienholder may force a sale of your home. This is true of many property tax liens or federal tax liens, for example. This is not commonly an option, however, for creditors like credit card companies or debt collection agencies. They may have to be patient and wait until you sell or refinance the home.
First, if a debt collector is threatening to put a lien on your home, and it has not sued you and obtained a judgment first, we strongly recommend you get a free consultation with a consumer law attorney as soon as possible. The debt collection agency’s threats may be illegal under the Fair Debt Collection Practices Act and you may be entitled to damages. The attorney may even be willing to take your case at no upfront cost to you. It certainly doesn’t hurt to find out what your options are.
If you simply want to ask an attorney a question, here is an inexpensive online service that can help:
If a lien has already been filed, here are some options:
File to have it released: If a creditor’s lien has been filed already and your home equity is “exempt,” or protected from creditors (or debt collectors collecting on their behalf), or if it is erroneous, you may be able to file paperwork with the court to have the lien removed. The procedure for doing this varies by state. (For example, in Maine, you file a Request to Discharge Execution on Real Property.)
Pay or settle it. If you can afford to pay it off, you may want to do that to put it behind you. You may be able to work out a payment plan, or negotiate to settle the debt for less than the full balance by paying a lump sum. It can be harder to do that when there is a judgment against you since the creditor knows it has the power of that court judgment to collect the debt. Still, it may be worth a try. Either way, if you pay the debt, make sure you get a written agreement and keep good records. You’ll also want to make sure the judgment creditor files a release of the lien when the debt has been paid off.
Wait until it’s too old. Judgment debts are subject to statutes of limitations which eventually expire. But warning: this can be a long time (10-20 years in many states) and the judgment creditor (the original creditor or debt collector who got the judgment) may be able to renew it. By paying on the judgment you will likely extend this time period. If you have a lien on your home for a very old debt you may want to contact an attorney to find out if it’s outside the statute of limitations.
If a lien has been filed because there is a judgment against you and you can’t pay it, we encourage you to talk with a bankruptcy attorney who can explain what the judgement creditor can and cannot do to collect the judgment. Bankruptcy attorneys are quite familiar with a variety of financial problems like this, and will help you understand your options.
Dispute it. If you believe the lien was filed erroneously, you will want to dispute it. (You may also be able to dispute the debt that led to collections.) Your best bet is to consult a consumer law attorney. If you do and discover you cannot afford an attorney, you may want to look into other options such as legal aid or representing yourself in court.
In the past, judgments and tax liens appeared on consumer credit reports and had a very negative impact on credit scores. However, a few years ago the major credit bureaus agreed to not to report these because certain information could not be verified. It is unlikely that a lien will appear on your credit reports and affect your credit scores.
However, it’s a good idea to check your credit reports and scores to make sure. You can get your free credit reports at AnnualCreditReport.com and there are dozens of places where you can monitor your credit scores for free.
Of course the collection accounts or the debts from the original creditor that led to the lien may appear on your credit reports. Learn what to do about collection accounts on credit reports.
An attorney can also help you with problems such as wage garnishment, figuring out how to handle debts in collections and other financial problems.
In addition, if you have a complaint about unfair collection practices by a creditor or collection agency, you may want to file a complaint with the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission, or your state attorney general’s office. The agencies collect complaints about financial products and services and may take action if they identify a pattern of complaints.
Learn how debt collection laws can help you deal with debt collectors.